• Peer-to-peer lending is an increasingly popular system of credit that allows for credit agreements to be extended between people instead of just people and banks.
  • It’s also called P2P lending, and it’s usually administrated by a third-party company that’s there to make sure the process goes smoothly and the loan gets paid back.
  • One can sign up to peer-to-peer lending websites either as a lender or credit provider.

Peer-to-peer lending is an alternative form of credit that’s gaining a lot more speed in South Africa. Instead of approaching a traditional loans provider or a bank, a P2P lending company puts people with cash in touch with people who need it.

Need a loan? Here’s why peer-to-peer lending is becoming more popular and why you should consider it.

What’s Peer-to-Peer Lending?

Peer-to-peer lending is a form of alternative funding that can be described as crowdfunding for loans. Members who are either interested in providing cash or getting credit sign up to the same website, and this website – the peer-to-peer lender – makes sure that the loan gets paid when it should.

What’s Not Peer-to-Peer Lending?

When people talk about peer-to-peer loans, they’re talking about loans between people, but it’s not the kind of loan where you go up to a friend and ask them to sponsor 10k towards your next business idea.

Credit agreements between people aren’t considered the same as P2P loans. In fact, credit agreements between people aren’t something we’d recommend for anyone – no matter how you swing it, your pal from down the road isn’t a registered credit provider, and people almost always get screwed in agreements like these.

How It’s Different

The most obvious thing that makes a P2P loan different is the fact that it originates from another person instead of a financial institution such as a bank – usually with a third-party company involved to make sure that the transaction goes smoothly.

Peer-to-peer loans are also different from conventional credit because of the fact that you can often still get access to peer-to-peer loans even when the bank or other financial institutions won’t give you credit.

Tips for Interested Lenders

If you’d like to take out a peer-to-peer loan, step one is signing up to a reputable company. There are many available in South Africa – such as RainFin and PeerFin. Double-check the registration details, website name and the overall reputation of the lending company before signing up.

Then, you’ll be asked to outline your needs for the loan, and select your loan terms. Make sure that you read the terms and conditions for the loan through and through so that you know just what you’re agreeing to, for how long and at which interest rate.

Some business lenders will ask for a business plan so that you’re on the same page for where the money goes, but this isn’t true for all of them. Again, check the terms of your agreement to be sure!

Why Peer-to-Peer Lending?

There are many reasons why peer-to-peer lending can be a good investment when you’re in need of a loan or a leg-up financially.

  • Peer-to-peer loan agreements often have much better interest rates to offer than traditional loans.
  • Many times you can still apply for peer-to-peer loans even with a bad credit score, and sometimes even when you’ve been blacklisted.
  • If you’ve tried other avenues to secure financing and failed, peer-to-peer lending can give you access to the cash you need.

Registered Loans Provider? Double-Check

Because of the fact that peer-to-peer lending is new to many people, there are a lot of scams out there in-between legitimate loans companies. If you want to be sure that you’re going with a reputable loans provider instead of a scammer, check if they’re a registered financial company.

For South Africa, financial providers and third-party companies have to be registered with the National Credit Regulator (NCR). It also helps to search your chosen company to see how long they’ve been in business, and how many happy customers they have had versus complaints.

Need More Help?

If you need any more assistance when it comes to loans, check out some of our other articles on loans here.

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